Expansion of Medicaid could help employers

Businesses might not have to pick up tab for workers
with low incomes

Republican Gov. John Kasich's decision to back the controversial expansion of Medicaid under President Barack Obama's health care overhaul could prove beneficial to some employers, though the entirety of the health care reform law still might be a tough swallow for many in the business community.
Gov. Kasich last week urged state lawmakers to move forward with an expansion of the government-run health care program, which would extend coverage to 366,000 uninsured Ohioans.
In his announcement, the conservative governor cautioned he still was “not a supporter of Obamacare,” but stressed the role of the expansion in propping up the finances of hospitals that care for the uninsured as well as the importance of $1.4 billion in federal funds that would flow into the state as part of the deal.
Those broad strokes led the Greater Cleveland Partnership, the region's chamber of commerce, to throw its support behind the expansion just a few days before the governor's announcement.
Business groups long have argued that the cost of caring for the uninsured already has been shifted to those with private insurance in a “hidden tax” through premium hikes. Without the expansion of Medicaid, they've said, those increases could be even more severe.
“Who ends up paying for it? The business community,” Joe Roman, Greater Cleveland Partnership's president and CEO, said last week. “All legs of the stool would have seen undue harm as a result. There was no ability to just stand back.”
More pointedly, however, if lawmakers approve the expansion, local businesses employing a slew of low-wage workers could steer their employees toward Medicaid rather than pick up the tab for their health care, according to several health care attorneys and benefits experts that spoke with Crain's.
“The more people Medicaid scarfs up at the lower end, the less people employers are going to have to worry about,” said John McGowan, employee benefits attorney with Cleveland law firm BakerHostetler.

Will they migrate?

If approved, the Medicaid expansion would provide health care coverage to adults living at up to 138% of the federal poverty level, which equates to about $32,000 a year for a family of four and $15,400 a year for an individual. At present, Medicaid for the most part covers children and the elderly.
The Affordable Care Act, or Obamacare, dictates that employers with 50 or more full-time employees offer health insurance that meets certain requirements or pay to the government a penalty of $2,000 or $3,000 per employee. Employees have the option to select the employer plan or, if their income qualifies, Medicaid — something many experts say low-income employees might choose given the costs they would need to stomach for signing up for company-provided plans.
“I think it will definitely happen because Medicaid is a no-cost option for these folks” said Paul Nachtwey, vice president of Todd Associates, an insurance brokerage in Beachwood.
Employees also would have the option of buying their insurance on the public exchange — an online portal where individuals can shop for their own insurance. Their employers would be subject to the government penalty should they buy insurance through the exchange. However, should qualifying employees sign on with Medicaid, employers could skirt the penalty and forgo the cost of providing health care.
“That would have the immediate effect of reducing costs employer would have to bear,” Mr. Nachtwey said.
Gregory Hubbell, senior vice president in the Cleveland office of Aon Risk Solutions, a large insurance brokerage, said the expansion of Medicaid “certainly provides more options for all of us as individuals, so the tricky part for the employer would be, "What does Medicaid mean to me and my existing group health plan?' Now there are the public exchanges and Medicaid — those are two wild cards that people might gravitate to.”

Mounting concerns

The two pillars of health care reform driving President Obama's goal of universal health care coverage are the Medicaid expansion and the individual mandate, which is the law's provision that requires most Americans to carry health insurance. To the delight of many conservatives, the U.S. Supreme Court last year ruled that individual states could sidestep the Medicaid expansion — a decision only a handful of Republican governors thus far have bought into.
Gov. Kasich's decision to go forward with the expansion has been seen by many as a sign the conservative movement is weakening in its opposition to the Affordable Care Act in the face of the president's re-election. However, others have suggested it would have been irresponsible to forgo expanding coverage in Ohio at no additional cost to the state.
The federal government has pledged to pick up the full tab for the first three years of the Medicaid expansion. Thereafter, the feds would cover 95%, which declines to 90% over time. Gov. Kasich, however, promised to reverse his decision should the feds fail to come through with the promised support.
“This is in no way his endorsement of Obamacare,” said Robert Klonk, CEO of Oswald Cos., a Cleveland-based insurance brokerage. “He put politics aside and did what's best for the citizens of Ohio. This was the only choice he really had.”
Many people, however, are concerned that putting more low-income individuals on government-financed health care programs only will push premiums for private payers north, considering Medicaid reimbursements rarely cover hospitals' costs of providing care.
Despite signaling its support for the expansion, the Ohio Chamber of Commerce said in a statement it still had “serious concerns” about the long-term financial stability of the program
As Oswald's Mr. Klonk put it, “This is not going to drive down costs at all. This is the hand we were dealt, and we have to play it the best way we can.”